Magazines singing the blues despite glitz at annual awards

The setting was a swank hotel in Beverly Hills, where a cup of coffee and a bowl of soup delivered to your room sets you back $25. Men in black tie and wom-en in evening gowns gathered last Tuesday evening for the Magazine Publishers of America's annual Kelly Awards ceremony. Champagne was served, along with quail-egg-and-caviar hors d'oeuvres. There were goat-cheese croutons drizzled with balsamic vinaigrette, baked filet of Northern Halibut and vanilla creme brulee. There was a $100,000 grand prize to award to the best magazine ad (it went, deservedly, to Arnold Worldwide's brilliantly simple print campaign for the VW Beetle).

It was all quite glamorous, as magazine industry events usually are. But all the extra touches couldn't really mask the scent of fear and uncertainty that permeated the ballroom. These are tough times for the magazine business.

Earlier that same day, those members of the MPA board who bothered to fly out to Los Angeles gathered to discuss the industry's most pressing problem: the sharp rise in postal rates. The board decided to ask members for more money to cover lobbying costs in Washington, knowing there would be resistance. It's not easy to rally support for an issue at once so Byzantine and so dull. But publishers finally have realized the rate hikes threaten to wipe out hundreds of millions of dollars in profits across the industry, and nothing focuses their attention like the bottom line.

Unfortunately for the industry, the postal issue is only one of many headaches. "Double whammy" is the phrase of choice in the print business these days, a reference to the twin evils of rising costs and declining revenue. A quick look around the ballroom showed one of the small ways in which the double whammy has impacted the business. Attendance at the awards ceremony was down by a third from last year, when the event was held in Chicago. Many of the 400 or so people who attended were L.A.-based magazine reps; the flights from New York carried barely a handful of industry bigwigs.

"It's the worst publishing environment in 25 years, maybe longer," said one attendee, who offered unvarnished views in exchange for anonymity. "We're getting hit on two fronts. On the cost side, we're getting clobbered on subscription acquisitions and we're getting clobbered on postal. There are a lot of big publishing companies that can't afford to pay the postal increases and remain profitable. But people still have their heads partially in the sand.

"On the revenue side, advertising is down, although hopefully that's just temporary, and we just saw a decline in retail sales for the first time ever."

It isn't only cross-country travel that's being trimmed out of budgets. Many publishing companies are cutting staff and otherwise tightening their belts. There's fear that quality will suffer as publishers trim editorial budgets and use cheaper paper. There's a growing sense that a shakeout is coming and, along with it, a reshaping of the landscape. More magazines will go under, and more will be sold. Whole publishing companies will be swallowed up or merged.

"You have enormous consolidation among paper and printing companies, and the same thing is happening on the buying side," the anonymous attendee said. "When you've got consolidation of your buyers and your vendors, you'd better start consolidating yourself. There has to be tremendous integration."

It's already happening. Black books of financial information are piling up, according to another attendee, who said, "If I wanted to, I could spend my whole week fielding phone calls from people who want to sell their magazines."

If the challenges are formidable, they are offset somewhat by the strong fundamentals of the publishing business and the knowledge that at least some of the current pressures are cyclical. "Magazines are here to stay," the first attendee said. "There'll just be a lot fewer of them."

The second attendee, betraying his marketing and sales background, even found a way to put an optimistic forward spin on 2001's odyssey. "It's a good year," he said, "to be compared to."